• Agile Leadership

This is how archetypal Dutch companies innovate

Innovation in the polder

In a world where customer demands are ever more fluid, innovating is an essential survival strategy. For that reason, almost every large organization now has its own innovation studio. In this article, 3 innovation leaders discuss and how archetypal Dutch companies innovate.

Innovation processes are characterized by the experimental setting, uncertain outcome and an often a-linear course. Precisely these 3 circumstances are reasons why Edwin van Bommel(chief innovation officer ABN AMRO), Rob Paauw(head Innovation Studio PostNL) and Martin Molenkamp(manager Digital Portfolio & Innovation, HEMA) go to work every day with great energy. Guiding innovation is their passion.

Using 3 themes – governance, innovation portfolio and innovation framework – they discuss how they encourage innovation, which innovations they particularly focus on and what methods they use. They also offer 4 tips for start-up organizations.

Governance

Place in the organization

“Real innovation is not done from one team, but with the entire organization,” says Edwin van Bommel (ABN AMRO). This is a statement that the other innovation leaders agree with. For example, Rob Paauw (PostNL) indicates that his goal is to embed innovation in the organization, making his innovation studio redundant.

Nevertheless, innovation currently has its “own” place in all three organizations. At HEMA and PostNL there is an organization-wide innovation studio. ABN AMRO has a central team dedicated to disruptive innovation, while day-to-day innovation lies with the business lines.

Decision-making

Decision-making regarding innovation projects takes place at HEMA and ABN AMRO in “innovation boards. Edwin van Bommel explains, “Decisions are made by an investment board in which both executive committee members participate, a substantive theme owner and myself. This investment board decides where innovations land; that can be outside or within ABN AMRO.” Within ABN AMRO, data-driven choices are made based on 3 factors: potential, risk and strategic fit.

At HEMA, we work with a “funnel committee. Martin Molenkamp explains: “This committee not only assesses the progress of innovation projects, but also monitors the handover to the business lines: after proof of concepts (POCs) and prototypes in the innovation studio, a handover to the business takes place where larger pilots or experiments are set up.”

Within PostNL, decision-making is based on three factors:

• desirability (is this something the customer really wants?),
• feasibility (does this build on the PostNL assets?).
• viability (is this a sustainable profitable business model?)
  

Decisions are made by the internal sponsors/stakeholders.

Innovation portfolio

In the world of innovation, a distinction is often made between 3 innovation horizons:

• Horizon 1 (H1): innovation aimed at strengthening or improving core activities of the organization (incremental innovation). The focus here is on maximizing the exploitation of market potential.
  
• Horizon 2 (H2): innovations are new products or services related to the organization’s services. A new product-market combination can also be an example of a horizon 2 innovation.
  
• Horizon 3 (H3): innovations are transformational and disruptive in nature. These are often groundbreaking ideas whose potential is still uncertain.

The innovation studios of HEMA and PostNL focus mainly on H2 and partly on H1 innovations. Rob Paauw (PostNL) finds the interaction between H1 and H2 interesting: “I see that innovations often start from strengthening current products – horizon 1 – and that these cost savings create space for establishing new business models. For example, we recently started an innovation project to relieve the parcel delivery network. By starting from this basis, we create space to also look at innovative revenue models in the process.”

Edwin van Bommel’s team (ABN AMRO) focuses primarily on disruptive innovation: “I myself often distinguish between ‘sustaining innovation’ and ‘disruptive innovation’. Sustaining innovation involves further improving existing products or launching new services that can be brought to market within 6 to 9 months. As an example, consider a new feature within mobile banking. Meanwhile, my department focuses particularly on disruptive innovation: new business models based on services with which the bank is not yet active in the market.”

“Basically, we are working on 3 themes around disruptive innovation: 1. smart & sustainable urbanization, 2. platforms and 3. digital assets. These themes contribute strongly to our purpose: Banking for better for generations to come. With our portfolio we try to strike a balance between H2 and H3 innovations, continuously testing whether the disruptive ideas have the right ‘ground’.”

Innovation framework

Start of an innovation process

HEMA uses a proprietary innovation framework consisting of five phases, explains Martin Molenkamp: “Starting with the first phase, the innovation teams use the Lean Canvas. This canvas is updated in each phase. In the exploration and validation phase, we look at whether there is a customer problem that is big enough to be solved by HEMA. In this we use tools from design thinking.

If the problem is significant, then we enter the next 2 phases: 1. problem-solution fit and 2. product-market fit. In these phases, we focus on building proof of concepts or prototypes that we use to validate solutions in a short period of time. You can think of this as an implementation of Lean Startup.

If an innovation looks promising, we normally do a handover to the business where the innovation is “piloted” among a small portion of the market. These are teams that generally work through the Scrum framework.”

During an innovation process

ABN AMRO has developed its own innovation framework: DARE. This framework is based on Lean-startup, Agile and design-thinking, among others, and consists of similar phases as the HEMA framework. For the entire bank and also partners working with ABN AMRO, a platform is available with practical techniques and tools and techniques, related to the phase the innovation initiative is in.

DARE helps accelerate and focus. “In the time of rapid technological change, changeable customer demands and complex laws and regulations, it provides a handle. And the great thing is that we have aligned DARE – the methodology – and the investment board’s decision criteria,” said Edwin van Bommel.

Completing an innovation project

Rob Paauw (PostNL) is constantly looking for the right moment to take an innovation project back out of the studio and bring it to the business line: “The strength lies in the structured validation of hypotheses through prototypes. The moment we see that we have found a clear solution to a customer problem, I think the business lines are suited to realize and market this innovation.”

“OUR STRENGTH LIES IN THE STRUCTURED VALIDATION OF HYPOTHESES THROUGH PROTOTYPING.”

This transfer is relatively easy because an innovation project at PostNL is always supervised by a Product Owner from one of the business lines, who is supported by experts from the innovation studio, among others. Tools and techniques used at PostNL, as at the aforementioned 2 organizations, come mainly from design-thinking and Lean-startup.

Advice to start-up organizations

Start fast and small

“Innovation is big and important, but start small and lighthearted,” said Martin Molenkamp. At HEMA, the innovation studio also started projects close to the current service (horizon 1) in the beginning. This way, the rest of the organization also gets involved in innovation and the innovation methodologies.

Dare to fail

“Failure is important to move forward. You do have to dare to fail from a conscious choice and not from incompetence,” said Edwin van Bommel (ABN AMRO). “We also say fail to learn. You thereby limit risk and learn from the steps. We encourage teams to constantly validate all assumptions, but invalidations also bring you closer to the customer’s needs. Both are equally important. If you don’t learn while failing, you won’t move forward and your innovation won’t be successful.”

Validate the setup of your studio

‘Pratice what you preach’ is Rob Paauw’s (PostNL) advice to start-up organizations. From his perspective, this means that when setting up an innovation studio, you have to keep validating whether the chosen framework is producing the right results. Rob’s thesis is: “As with any innovation, this means that you want to test different setups in order to move forward. Setting up a framework that fits your organization takes at least 2 years.”

Leverage the entire organization

Innovation must be embedded with all employees within the organization. For this reason, the innovation studios of all three organizations also provide internal training. Rob Paauw: “The methods used in the innovation studio are very valuable for the whole of PostNL, according to our business owners. That’s why we think the internal ‘academy’ is an important pillar for moving the organization forward.” Martin Molenkamp also sees an essential role for an internally set up academy: “Everyone within HEMA should be able to come up with ideas. I want us to start using the whole ecosystem, and we are not doing that enough at the moment.”

Successful innovation at HEMA

‘Click&Collect’ – Innovation horizon: 1

Innovation: The customer journey around picking up an order in one of the HEMA stores was mapped. This revealed ‘problems’ for 2 target groups: the employee and the customer. The employee is supported with an application on the PDA that speeds up the handling of the package to be picked up, which positively influences the customer experience.

This project led to the development of an overarching vision of an employee dashboard in which an employee can gain insight into open tasks and actionable insights, among other things, in a single environment that contributes to an improved shopping experience.

Successful innovation at PostNL

‘Transporting Less Air’ – Innovation horizon: 1

Innovation: Almost every consumer is annoyed by small products packed in boxes that are too large. The Less Air Transport project has identified the problem (quantitatively) and is now focusing on involving chain partners (especially web shops) in this problem and exploring pricing models where shipping prices are based on package size.

This trajectory perfectly demonstrates that it takes several parties to solve the customer problem. Through experiments, it has been shown that there is a significant business case for retailers to package smarter.

Successful innovation at ABN AMRO

‘DELIVER’ – Innovation horizon: 3

Innovation: ABN AMRO partnered with Port of Rotterdam and Samsung SDS to run the first paperless, instantly funded, door-to-door traceable container from Korea to the Netherlands on the blockchain-enabled platform.

In addition to great innovations that ABN AMRO is (co-)developing, the bank also sees disablements as a success because there is an awful lot to learn from them. “This enables us to keep moving forward.”